On August 9th， media outlets reported on the long-standing scheme involving Li Cheng， the Market Director of the prominent quantitative investment firm Huifang Quant， and employees of China Merchants Securities. This revelation sheds light on the rumors that surfaced last November concerning the detention of a Huifang Quant employee for alleged involvement with brokerage rebates.
To understand the origins of this case of illicit benefit transfer， it is necessary to examine the career paths and business dealings of the individuals involved.
It is reported that Li Cheng previously worked at China Merchants Securities. Due to a combination of business relationships and personal connections， Huifang Quant channeled a significant portion of its high-frequency， large-volume trades through specific branches of China Merchants Securities.
However， direct rebate of commissions to clients by securities firms is strictly prohibited by regulatory bodies.
To circumvent these regulations， Li Cheng collaborated with Meng Pengfei， the former General Manager of the Shennan East Road branch of China Merchants Securities， to devise a “circuitous rebate” strategy.
The detailed operation involved Meng Pengfei’s relatives acting as exclusive brokers for Huifang Quant. These relatives would direct Huifang Quant’s trades to designated brokerage branches and subsequently receive performance bonuses through their personal bank accounts.
Investigations indicate that over a six-year period， from 2018 to 2023， the pair illicitly siphoned approximately 118 million yuan in rebates through this illegal scheme. Of this amount， over 20 million yuan went into Li Cheng’s accounts， 10 million yuan was used to “influence” Liu Huan， the General Manager of the Private Client Department at China Merchants Securities headquarters， and the remaining over 80 million yuan was retained by Meng Pengfei.
In November 2024， Li Cheng was taken in for investigation. According to a report by China Times on November 22， 2024， the newspaper contacted Huifang Quant for verification at the time.
A representative from Huifang Quant’s market department responded: “We have received information that Li Cheng is cooperating with an investigation， but the specific content of the investigation is unknown. The company has not received any official notification and is unable to contact him. This is considered an individual employee’s action and has not impacted the company; all business operations are proceeding normally.”
Notably， prior to the incident， Meng Pengfei attempted to secure protection by offering 3 million yuan worth of gold to Gao Xiang， the then-head of China Merchants Securities’ Shenzhen branch.
Although Gao Xiang returned the gold， he was still placed under investigation for suspected dereliction of duty， with a case officially opened on May 30th of this year.
Publicly available information identifies Huifang Quant as a leading quantitative hedge fund in China， holding a significant position in the quantitative investment sector. It is recognized alongside Jiukun Investment， Mingzhun Investment， and Lingjun Investment as one of China’s “Four Heavenly Kings of Quant.”
Established in 2015， the company primarily focuses on quantitative investment strategies， with a particular emphasis on index enhancement strategies. Its founding team began researching quantitative hedging strategies in 2008. In October 2015， it launched its first public offering of a private equity fund， and on October 21， 2016， it deployed its first trading position generated by deep learning technology. By 2017， deep learning technology was fully integrated into its trading operations.
Furthermore， in April 2023， in its pursuit to explore the fundamental nature of Artificial General Intelligence (AGI)， Huifang Quant publicly announced the establishment of a new independent research organization named “DeepSeek.”
